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Benefit Duration and Unemployment Entry: Quasi-experimental Evidence for Austria

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Winter-Ebmer, Rudolf

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Abstract

This paper studies the impact of a selective extension of unemployment benefit duration on the incidence of unemployment in Austria. As the new law applies only to elderly workers in certain regions of the country after June 1988, a quasi-experimental situation is created. Unemployment entry is found to rise by between four and eleven percentage points due to the new law. The findings are explained by a breach of an implicit contract; elderly workers receive wages above their marginal product in order to elicit higher effort. Dismissal of elderly workers is now easier because more generous unemployment insurance makes reputation loss for the firm less severe.

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Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1521.

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Date of creation: Dec 1996
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Handle: RePEc:cpr:ceprdp:1521

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Related research
Keywords: Elderly Workers; Implicit Contracts; Unemployment Entry; Unemployment Insurance;

Find related papers by JEL classification:
J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings

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  1. Mario Schnalzenberger & Rudolf Winter-Ebmer, 2008. "Layoff Tax and the Employment of the Elderly," Economics working papers 2008-19, Department of Economics, Johannes Kepler University Linz, Austria. [Downloadable!]
    Other versions:
  2. Winter-Ebmer, Rudolf, 2001. "Evaluating An Innovative Redundancy-Retraining Project: The Austrian Steel Foundation," CEPR Discussion Papers 2776, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Rafael Lalive & Josef Zweimueller, 2002. "Benefit Entitlement and the Labor Market: Evidence from a Large-Scale Policy Change," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  4. Rafael Lalive & Josef Zweimüller, . "Benefit Entitlement and Unemployment Duration - The Role of Policy Endogeneity," IEW - Working Papers iewwp112, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  5. Lalive, Rafael & Ours, Jan C. van & Zweimueller, Josef, 2006. "How changes in potential benefit duration affect equilibrium unemployment," Discussion Paper 94, Tilburg University, Center for Economic Research. [Downloadable!]
  6. Rudolf Winter-Ebmer, 2000. "Long-term consequences of an innovative redundancy-retraining project: The Austrian Steel Foundation," Economics working papers 2000-29, Department of Economics, Johannes Kepler University Linz, Austria. [Downloadable!]
  7. Rudolf Winter-Ebmer, . "Do Immigrants Displace Young Native Workers: The Austrian Experience," IEW - Working Papers iewwp011, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
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